When dollars go digital

The Internet is about to poke George Washington in the eye ... and Abraham Lincoln and all those other famous men peering out from the front of America's legal tender.

Thanks to online commerce, new kinds of currency will some day challenge those greenback paper giants.

No one's quite sure what they'll look like: virtual nickels and dimes people spend but never see, or frequent-flier miles, Disney dollars, or some other creation that was never minted on a government printing press. But something is coming.

"The exchange of value on the Internet is not going to be necessarily tied to any particular piece of plastic or any particular piece of paper," says Bill Melton, chief executive and chairman of CyberCash, an online payment pioneer in Reston, Va.

"I think we're going to head into a world very quickly where you're going to see people's own currency emerge," adds Tony Fernandes, "vision guy" and cofounder of Market Systems, a San Jose, Calif., firm that helps companies set up electronic-money programs.

Of course, the clink of coins and shuffle of bills have long been giving way to the beeps and blips of more modern payment systems: credit cards and, more recently, debit cards, which immediately charge purchases to a consumer's bank account.

Poor track record

Yet previous predictions that a new e-money would challenge those innovations have proved disastrously wrong so far. E-money pioneer DigiCash declared bankruptcy last year. CyberCash and another early player, FirstVirtual, have changed their business focus.

Nevertheless, e-money experiments are again mushrooming online. If these new companies answer real consumers' needs, they could go a long way toward transforming the dough America spends, several observers say.

And this time, entrepreneurs seem more realistic. Instead of trying to change Americans' spending methods singlehandedly, they're targeting specific audiences with more familiar instruments.